Furman Says White House to Continue Trade Push, Weighs In on Economic Questions

A top White House economic adviser on Friday said the Obama administration would continue to push Congress to approve fast-track authority for trade deals, saying that recent pushback by Senate Majority Leader Harry Reid (D., Nev.) wouldn’t derail their effort.

The White House

Associated Press

White House Council of Economic Advisers Chairman Jason Furman also weighed in on a range of other topics, including the upcoming White House budget proposal, labor force participation, and complaints from some critics that the White House is trying to overwhelm the wealthy with tax increases.

His comments came at a breakfast hosted by the Christian Science Monitor. Here are some of the topics Mr. Furman covered:

1) BUDGET. Mr. Furman said he didn’t “want to lift the curtain one way or another” on what will be in the March 4 budget proposal, but he did offer some clues.
He said, for example, that the budget proposal will have new spending on “investments in key areas for growth” combined with deficit-reduction measures that include new taxes. He wouldn’t say, though, whether the White House would restate its push to limit future growth of Social Security benefits. In perhaps a hint that the White House might ratchet back some of its deficit-reduction rhetoric from past years, Mr. Furman said “there has been significant” deficit reduction achieved to date. “It’s important for people to understand that,” he said.

2) TRADE Mr. Furman said Mr. Reid’s comments didn’t come as a surprise to the White House. He said the White House was continuing to negotiate trade deals with countries in Asia and Europe and that it was essentially for Congress to pass a law that lets the White House have an up-or-down in Congress on trade deals. This is known as trade promotion authority, or TPA.
“You can’t negotiate those with our partners and you can’t implement [trade deals] here in the United States if we don’t have TPA… What’s important is that as [U.S. Trade Representative Michael] Froman is negotiating with the Europeans, negotiating with the Asians, negotiating with our other partners those agreements, that he can make it very clear to them that as we are asking for concessions from other countries, that we are going to be able to deliver and implement those agreements here in the United States. That’s why it’s so important to strengthen the hand of our negotiator in those agreements by having forward momentum and a path forward for TPA.”

3) LABOR FORCE Mr. Furman said there are two “main” things impacting the labor force participation rate (it’s very low by historical standards). Mr. Furman said these two factors are both demographic and cyclical. On demography, he said the large number of aging Baby Boomers was having a remarkable impact on the number of people leaving the labor force.
“If you just zoom in on the past two or three years, it’s pretty much all of the decline in the participation rate is due to demography,” he said.
The other issue is the economic downturn. “When the unemployment rate rises, there are some people that will stay in school longer rather than looking for jobs, some maybe after having a baby won’t reenter the labor force. Some will certainly be discouraged and give up looking for a job. As the unemployment rate comes down, we expect to see those people coming back into the labor force,” he said.
While he predicted the economy was going to help the participation rate, he said the demographic changes would continue applying pressure. “As those people are coming back into the labor force, the demography is going to continue to pull that participation rate down. So over the next couple of years, you are basically going to see two offsetting effects on the participation rate.”

4) UNEMPLOYED Mr. Furman said “our biggest short-run cyclical challenge is long-term unemployment.” He said “the entire elevation of the unemployment rate is due entirely to the long-term” unemployed.

5) “SECULAR STAGNATION” Mr. Furman challenged the idea that the economy was locked in some sort of “secular stagnation” that was muzzling economic growth and employment.
“I generally don’t think there’s very good evidence for secular stagnation. I think first of all there’s less of a puzzle to be explained in terms of recent growth as proponents of secular stagnation would have you believe. And second of all, in terms of where the economy has been lately and where it appears to be going, less reason to believe it going forward.”

6) IMMIGRATION Mr. Furman weighed in on the debate about whether a path to “legalization” should be acceptable to the White House, which has pushed for a path to “citizenship” for immigrants.
“One thing the president has said is you don’t want to do a major once-in-a-generation, less frequent than that, piece of legislation and solve half the problem and leave people in some kind of in-between state.”

7) MARIJUANA Asked whether he had done an economic analysis of the recent legalization of marijuana in Colorado, Mr. Furman avoided weighing in. “I just really have not looked at the cost benefit of that,” he said.

About Real Time Economics

Real Time Economics offers exclusive news, analysis and commentary on the U.S. and global economy, central bank policy and economics. Send news items, comments and questions to the editors and reporters below or email realtimeeconomics@wsj.com.